The loyalty penalty in essential markets: one year since the super-complaint

The loyalty penalty in essential markets: one year since the super-complaint 164 KB

People are being stung simply by staying loyal to their provider. Last September, Citizens Advice submitted a super-complaint to the Competition and Markets Authority (CMA) about the £4bn loyalty penalty people pay across 5 essential markets - mobile, broadband, cash savings, home insurance and mortgages. 

This paper sets out what progress we think has been made 1 year after submission, what regulators have planned, and what measures we expect to be taken by both regulators and government by December 2019 to ensure the loyalty penalty is tackled. In summary we believe more sufficient progress is needed on the following priorities by the end of the year: 

  • In mobile, Ofcom should ensure that mobile phone providers follow through on their promises to voluntarily reduce loyal customers’ bills by February 2020. If Three continue to refuse to follow the other providers, Ofcom should take further action to make them treat loyal customers fairly.

  • In broadband, Ofcom should ensure that the vast majority of vulnerable and low-income customers are not paying a loyalty penalty and that firms have clear and fair pricing policies that ensure all customers are paying a fair price.

  • In mortgages, the Financial Conduct Authority (FCA) should work with firms to identify low-income households who are on Standard Variable Rates and take action to ensure that these customers are not paying a loyalty penalty.

  • In cash savings, the FCA should confirm and implement its Basic Savings Rate proposal.

  • In insurance, the FCA should ensure that the vast majority of vulnerable and low-income customers are not paying a loyalty penalty and that firms have clear and fair pricing policies that ensure all customers are paying a fair price. It should set out how it intends to limit or ban price walking.

  • Across markets, regulators should follow up on the CMA’s feasibility study and use their data request powers to measure the loyalty penalty accurately, so that they can track whether solutions are having any effect.

We originally asked the CMA to undertake a market study as a route to help tackle the loyalty penalty. While we recognise that these changes may not all be possible in the next 3 months, we’ll revisit this position if we don’t feel enough progress has been made by December.